Building a Legacy for the Next Generation of Black Women Entrepreneurs

Black/African American women are one of
the fastest growing demographics of entrepreneurs in America and are key to
driving small business growth. In fact, according to the Wells Fargo 2024
Impact of Women-Owned Businesses Report, between 2019 and 2023, Black/African
American women-owned businesses saw average revenues increase 32.7 percent,
compared to 12.1 percent for all women-owned businesses.

To offer perspective, after the 2008
financial crisis, women-owned businesses had not only recovered but had
surpassed average revenue levels from before the crisis to 2008: $172,000 in
2019 compared to $151,700 before the crisis. However, this was not the case for
Black/African American women-owned businesses, whose average revenue was
$35,600 in 2019 compared to $40,400 prior to the crisis. 

Fast forward to the Covid-19 pandemic,
Black/African American women-owned businesses came out stronger and now,
Black/African American women business owners have outpaced growth between 2022
and 2023 in terms of employment and revenue compared to all women-owned
businesses. 

Whether starting, stabilizing, or
growing businesses, Black/African American women-owned small businesses are
expanding. Today more than ever, it is crucial to build wealth for the next
wave of Black/African American women entrepreneurs. Supporting the future of
Black/African American women-owned businesses requires focusing on key areas,
such as addressing gaps in funding, growing access to capital, and providing
robust mentorship opportunities. 

Filling the gaps in funding

Despite starting new businesses at high
proportions, many Black women and women of color obtain funding at lower rates.
Research shows that women of color receive less than 0.2 percent of
venture-capital funding. Black women also encounter similar barriers in
accessing capital, with about 61 percent self-funding their business and
exhibiting a higher level of debt. For example, during the Covid-19 pandemic,
many Black/African American businesses experienced difficulty attaining federal
stimulus payments. Furthermore, in 2020, there was a decline in Black/African
American-owned businesses.

Building wealth for the next generation
of Black/African American women entrepreneurs starts with building resources
and growing capital for the entrepreneurs of today.

Improving access to capital

It’s important to acknowledge that
access to capital remains a challenge for Black/African American women-owned
businesses, even in the face of increasing revenue. According to the Wells
Fargo 2024 Impact of Women-Owned Businesses Report, Black/African American
women-owned businesses employ approximately 9.4 workers and generate $1,037,900
compared to all women-owned businesses, which employ approximately 8.5 workers
and generate $1,602,500.

 While barriers to funding persist for
many Black/African American women-owned small businesses, new bank and
philanthropic programs are now being built to address this gap and help Black
women identify capital opportunities to build sustainable small businesses. In
addition to traditional lending, working with Community Development Financial
Institutions (CDFIs) and Minority Depository Institutions (MDIs) can create an
ecosystem of support that provides additional avenues to accessing capital.
These institutions specifically work with underserved entrepreneurs including
those in low-to-moderate income areas and minority populations.

Supporting these organizations and
their mission was at the heart of the creation of Wells Fargo’s Open for
Business Fund, an industry-leading effort that has donated roughly $420 million
to support nonprofits that serve small businesses; the Small Business Resource
Navigator, an online portal helping connect small business owners to potential
financing options and technical assistance through CDFIs; the Capital Pathways
Workbook, a free resource that helps entrepreneurs map their capital needs to
business goals and objectives; and a $70 million fund in partnership with Hello
Alice to improve access to credit and capital for underserved
entrepreneurs. 

By empowering Black/African American
women-owned businesses with the financial resources they need, we enable
businesses to scale, grow, and build for the future. Fostering the growth of
Black/African American women-owned small businesses through improved access to
capital is an investment in the long-term success of the business. By
dismantling financial barriers and building an environment where businesses can
thrive, generational wealth can be an attainable goal for all.

Harnessing mentorship 

Investing in education and mentorship
programs specifically designed for Black/African American women entrepreneurs
can provide valuable resources and guidance. By addressing systemic barriers
and supporting equitable opportunities, we can contribute to the sustainable
growth of Black/African American women-owned small businesses, ultimately
playing a part in building lasting generational wealth. 

This level of support is at the heart
of Milestone Circles, a mentoring program for women entrepreneurs offered by
the Nasdaq Entrepreneurial Center and funded by the Wells Fargo Foundation. The
majority of the participants, (86 percent), have been Black, African American,
and/or Afro-Caribbean, and have learned to improve their business alongside a
circle of fellow entrepreneurs. Building strong business and community networks
can significantly enhance the success and sustainability of all women-owned small
businesses.

As Black/African American women
continue taking the lead in business ownership, we all must continue taking
steps to maintain and support their momentum. By addressing both systemic
barriers and promoting proactive support, including improving access to capital
and mentorship opportunities for Black/African American women-owned businesses,
we can pave the way for sustained growth and build pathways for the next
generation. 

Adriana Fominaya is a lead business
growth strategy consultant at Wells Fargo.